Diversified equity investments in subsidiaries of listed companies and the cost of corporate bonds

Different from prior studies, this paper examines the relationship between the diversified equity investments in subsidiaries of listed companies and the cost of corporate bonds. This study finds that the high degree of diversified equity investments in subsidiaries of listed companies is related to the low level of bond yield-spreads when the companies issue corporate bonds and compared with related diversification, unrelated diversified equity investments in subsidiaries of listed companies is related to the lower level of bond yield-spreads. This study provides the new empirical evidence on the antecedents of the costs of corporate bonds. It indicates that different from the diversification of consolidated statements-level, structural features of diversified equity investments in subsidiaries of listed companies can effectively improve the group´s internal capital market effect and the risk dispersion effect and then reduce the cost of corporate bonds.